What are Debt Recovery Tribunals (DRTs)?
Debt Recovery Tribunals were established to facilitate the debt recovery involving banks and other financial institutions with their customers. DRTs were set up after the passing of Recovery of Debts due to Banks and Financial Institutions Act (RDBBFI), 1993. Appeals against orders passed by DRTs lie before Debts Recovery Appellate Tribunal (DRAT). DRTs can take cases from banks for disputed loans above Rs 10 Lakhs. At present, there are 33 DRTs and 5 DRATs functioning at various parts of the country. In 2014, the government has created six new DRTs to speed up loan related dispute settlement.
Compared to the ordinary court procedures, DRTs were able to handle large number of cases with low delay during the initial phases. Though the DRTs have made impact on recovery front, several issues related to their performance in the background of rising volume of NPAs have appeared in later period. Inadequate infrastructure coupled with insufficient number of DRTs has made them incompetent to handle the rising volume of disputes.
Recent issues related with DRTs
The leading issue related with debt recovery through DRTs is the slow process of resolution (settling debts and finding end to defaults). Like several other debt recovery mechanisms, the DRTs are slow to work out on pending disputes. Nearly 93000 cases are pending in front of all the DRTs in the country at the end of 2016. The World Bank estimated that it took 4.3 years on average in India to resolve insolvency under the old laws, more than twice as long as in China. Similarly, the average recoveries were just 25.7 cents on the dollar in India. This is one of the worst among the similar economies.
- The number of DRTs are small given the increasing number of cases. –
- Delay in settling the cases is long.
- The DRTs were not able to handle cases related to large borrowers.
- Timely appointment of officials for DRT has not been made.
Recent efforts to rejuvenate DRTs: the RDBBFI amendment 2016
To correct the situation, government has made several efforts. Major one is the amendment to the RDBBFI Act 1993 in 2016. Similarly, the new Insolvency and Bankruptcy Code give powers to DRTs to consider cases of Bankruptcy from individuals and unlimited liability partnerships. Following are the main changes made to the RDBBFI Act in 2016 though the amendments are yet to be enforced.
The amendment gives timelines for various steps in the adjudication process before the debt recovery tribunals. Time limit for filing of written statements, passing of orders, appeals, etc. have been reduced. The Act Empowers the Central Government to provide for uniform procedural rules for the proceedings in the Debts Recovery Tribunals and Appellate Tribunals.
The amendment increases the retirement age of Presiding Officers of Debt Recovery Tribunals from 62 years to 65 years and that of the Chairpersons of Appellate Tribunals from 65 years to 67 years. It also makes Presiding Officers and Chairpersons eligible for reappointment to their positions.
The amendment allows banks to file cases in DRTs having jurisdiction over the area of bank branch where the debt is pending, instead in the DRT which have jurisdiction over the defendant’s area of residence or business.
Similarly, to reduce delays, the he cost on a borrower to delay recovery timelines through protracted appeals and proceedings has been increased.
Borrowers will have to deposit at least 75% of the outstanding amounts with the debt recovery appellate tribunal (DRAT) under the DRT Act to avail an appeal. Previously, this provision was required only under the SARFAESI Act.